Infrastructure Investment Trusts (InvITs) in India have seen a significant 29% growth in their Asset Under Management (AUM) as of September 30, 2024. The AUM of InvITs spanned various sectors, including roads, transmission, telecom, pipelines, renewable energy, and warehousing is expected to reach reaching around Rs 3.30 lakh crore by FY26.
Telecom accounted for over 50% of the AUM, followed by roads at 35% and transmission at 7%. InvITs are expected to contribute to India’s infrastructure development by offering investment opportunities and unlocking growth developers. The growth in AUM for road assets through InvITs.
Over the past seven years, operational NH-HAM projects valuing over Rs 70,000 crore have been monetized. However, challenges such as higher leverage, competitive bidding with NH-HAM projects awarding at lower premiums or discounts, and limited bank rate upside may impact the projects, particularly those awarded post-FY23.
The Indian infrastructure sector is set for substantial growth as Infrastructure while ensuring steady returns. valuation prospects of HAM Investment Trusts (InvITs) are expected to propel the expansion of road assets under management (AUM). According to a recent report by CareEdge, road sector.
AUM is projected to witness an addition of approximately ₹1.43 lakh crore in the provide a structured mechanism for investors to participate in long-term infrastructure projects while ensuring steady financial years underscores the growing role of InvITs in mobilizing funds and ensuring efficient infrastructure asset management.
InvITs: A Key Catalyst in Infrastructure Financing
Infrastructure Investment Trusts (InvITs) have emerged as a crucial financial instrument for channeling investments into infrastructure projects, particularly in the road sector. By enabling asset monetization, InvITs provide a structured mechanism for investors to participate in long-term infrastructure projects while ensuring steady returns.
CareEdge’s report highlights that the road sector will continue to attract significant investor interest, driven by government-backed initiatives, policy reforms, and an increasing emphasis on public-private partnerships (PPPs). The National Monetization Pipeline (NMP) and Gati Shakti initiatives are also expected to facilitate smoother fund flow into infrastructure projects.
Projected Growth in Road Sector AUM
According to CareEdge, the road sector’s AUM through InvITs stood at approximately ₹1.65 lakh crore in FY24. With the expected addition of ₹1.43 lakh crore over the next two fiscal years, the total AUM is projected to reach ₹3.08 lakh crore by the end of FY26. This substantial rise can be attributed to new road projects, of existing assets, and increased institutional investor participation.
The primary contributors to this growth include the National Highways Authority of India (NHAI), which has been actively leveraging InvITs for asset monetization Toll-based and annuity-based revenue models offer stable returns, attractive investment Private players such as IRB Infrastructure have also strengthened their portfolios, enhancing the overall AUM in the sector.
Factors Driving the Growth
Several factors are fueling the surge in road sector AUM through InvITs Supportive policies, including tax incentives and regulatory simplifications, have boosted Increased involvement of pension funds, insurance investors is driving fund inflows investor confidence road projects, the monetization of existing assets, and increased institutional investor participation.
- Challenges and the Way Forward
Despite the optimistic projections, certain challenges remain. Regulatory for long-term sustainable development. uncertainties, interest rate fluctuations, and execution risks can impact the pace of growthAdditionally, maintaining the operational efficiency of monetized assets will be crucial in ensuring sustained investor confidence.
Going forward, a conducive policy environment, enhanced transparency, and innovation in financing mechanisms will be key to sustaining the momentum in road sector investments. The successful execution of ongoing and upcoming projects will determine the extent to which InvITs can government.
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